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U.S. Bank Giants Benefit from Rate Hikes Amid Economic Concerns

U.S. banking heavyweights reaped windfalls from higher interest payments in the first quarter, brushing off a crisis prompted by the collapse of two regional lenders and setting aside billions of dollars if loans turn sour as the economic outlooak dims.

Citi Bank building
Citi Bank building

Q1 2023 Earnings Surpass Wall Street Expectations

First-quarter 2023 earnings from JPMorgan Chase & Co (NYSE: JPM), Citigroup Inc (NYSE: C), and Wells Fargo (NYSE: WFC) & Co beat Wall Street expectations on Friday as a consumer and corporate spending held up in the face of rate rises, although all three saw signs of a slowdown and made provisions accordingly.

JPMorgan: A "Port in the Storm" During Banking Turmoil

"Goliath is Winning," Wells Fargo analyst Mike Mayo said in a note citing a "uniquely strong quarter" for JPMorgan, calling it "a port in the storm" during recent banking sector tumult. JPMorgan shares soared 7.6% in their biggest one-day percentage gain since November 2020.

Banks Prepare for Economic Slowdown and Loan Losses

Banks are building up rainy-day funds as fears of an economic slowdown mount from the U.S. Federal Reserve's aggressive interest rate hikes to tame inflation and the recent turmoil fueled by the failures of two mid-sized banks.

U.S. Economy Robust, but Banking Crisis Poses Risks

JPMorgan CEO Jamie Dimon warned that while the U.S. economy remains robust, last month's banking crisis with the sudden collapse of Silicon Valley Bank (SVB) and Signature Bank (OTC: SBNY) could make lenders more conservative and hurt consumer spending.

Citigroup Prepared for Mild U.S. Recession

Citigroup, which also beat Wall Street expectations as it earned more from borrowers paying higher interest on loans, said it was prepared for a mild recession in the U.S.

Bank Shares Surge After Positive Results

Shares of several banks surged after the results, and the S&P 500 bank index closed up 3.5%. Citigroup surged 4.8%. Wells Fargo investors were less impressed, pushing its shares down 0.05%.

Investment Banking Struggles Amid High-Interest Rates

One area where it has proven harder for the big banks to profit in 2023 has been investment banking, which was reflected in JPMorgan's business with a 24% fall in revenue at the unit as dealmaking dries up in the face of high-interest rates, inflation and fears of a recession.

JPMorgan logo
JPMorgan logo

Provisions for Loan Losses Increase as Economic Concerns Rise

JPMorgan, Citigroup, and Wells Fargo have all increased provisions for loan losses in the first quarter of 2023 as concerns over the economy and potential loan defaults rise.

BlackRock Reports 18% Drop in Q1 Profit but Beats Estimates

BlackRock Inc (NYSE: BLK) - the world's largest asset manager - reported an 18% drop in first-quarter profit but beat analysts' estimates as investors continued to pour money into its funds, cushioning the hit to fee income from the banking rout that rocked global markets.

Upcoming Banking Results to Provide More Insight

More banking results are due over the coming week, including Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: G.S.) on Tuesday and Morgan Stanley (NYSE: M.S.) on Wednesday. Investors are also anxiously awaiting reports from several regional banks - the hardest-hit group during the banking tumult last month - for more clarity on their outlook.